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Microsoft backed OpenAI is considering changing its legal structure in order to woo more investors, as per a report from the Financial Times. The firm, which pushed artificial intelligence into the limelight in 2022, has been busy expanding its services since then. Its current structure, which sees a for profit division overseen by a nonprofit model, has been criticized by several quarters, with one of the most vocal critics being Elon Musk. Now, as per three people quoted by the FT, OpenAI is interested in ‘simplifying’ its business as part of a process that could remove limits set on investors earning profits, with a final decision remaining elusive as of now.
OpenAI Asserts That Non Profit Arm Is “Core” To Its Mission
While ChatGPT only became popular in late 2022 and early 2023, OpenAI has been working on artificial intelligence for years. The firm was set up in 2015, and spent its time developing AI technologies after raising funds from major players in Silicon Valley. As its products started to take shape, particularly after the release of GPT-2 in 2019, OpenAI’s ownership structure began to evolve.
This saw the firm limit its investor payouts to 100 times the investment after it created OpenAI LLP in March 2019. The firm justified this decision by stating that it needed to “invest billions of dollars” into the infrastructure needed to develop artificial intelligence as well as the need to compete with companies like Google that could offer their employees stock options as competitive packages. It also outlined that any returns above the owed payouts would belong to the “original OpenAI Nonprofit entity.”
The cap introduced in 2019 is now at the center of debate involving a revamped corporate structure for OpenAI to make itself more attractive for raising capital. An earlier report from the Wall Street Journal had claimed that Apple was interested in investing in OpenAI, as part of a funding round that had valued the firm at $100 billion.
In its latest report, the Financial Times quotes three sources that share that OpenAI is interested in revamping the business structure. “All preferred investors have a profit cap, there’s a lot of talk about making it a more traditional investment so we’re not capped on our upside,” the publication quotes one OpenAI investor. While the recent investment talks have seen claims of a $100 billion valuation for the firm, AI GPU maker NVIDIA is worth roughly $3 trillion even after its latest earnings results failed to impress investors on the twin fronts of growth and cost control.
In its statement given to the publication, OpenAI stressed that it is “focused on building AI that benefits everyone,” adding that the “non-profit is core to our mission and will continue to exist.” The struggle between its nonprofit and for profit structure has seen Elon Musk, one of OpenAI’s earliest investors sue the company.
As the FT notes, it was also at the heart of OpenAI CEO Altman’s ousting and return last year after a decision by the nonprofit board was eventually reversed through influence from investors, particularly Microsoft, in the for profit part of the company.
